Can growth-enhanced monetary policy improve welfare when people seek social status?
This paper examines the growth and welfare effects from an increase in the rate of money supply in an Ak type growth model with a relative wealth-enhanced social status motive, production externalities, and liquidity constraints. When only consumption is constrained by liquidity, fast money supply can hasten output growth unless seigniorage revenue is wasted and production externalities do not exist. We find that even though money growth normally promotes economic growth, it does not improve welfare when capital stock is over-accumulated. In general, an optimal monetary policy minimizes seigniorage. Our results also conclude that the optimal monetary policy rarely follows the Friedman rule. Copyright Springer-Verlag Wien 2013
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Hung-Ju Chen & Jang-Ting Guo, 2009. "Social Status And The Growth Effect Of Money," The Japanese Economic Review, Japanese Economic Association, vol. 60(1), pages 133-141.
- Pelloni, Alessandra & Waldmann, Robert, 2000.
"Can waste improve welfare?,"
Journal of Public Economics,
Elsevier, vol. 77(1), pages 45-79, July.
- Paul M Romer, 1999.
"Increasing Returns and Long-Run Growth,"
Levine's Working Paper Archive
2232, David K. Levine.
- Theodore Palivos & Chong K. Yip, 1995.
"Government Expenditure Financing in an Endogenous Growth Model: A Comparison,"
Departmental Working Papers
_057, Chinese University of Hong Kong, Department of Economics.
- Palivos, Theodore & Yip, Chong K, 1995. "Government Expenditure Financing in an Endogenous Growth Model: A Comparison," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(4), pages 1159-78, November.
- Theodore Palivos & Chong K. Yip, 1994. "Government expenditure financing in an endogenous growth model: a comparison," Working Paper 94-1, Federal Reserve Bank of Atlanta.
- Barro, R.J., 1988.
"Government Spending In A Simple Model Of Endogenous Growth,"
RCER Working Papers
130, University of Rochester - Center for Economic Research (RCER).
- Barro, Robert J, 1990. "Government Spending in a Simple Model of Endogenous Growth," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S103-26, October.
- Robert J. Barro, 1988. "Government Spending in a Simple Model of Endogenous Growth," NBER Working Papers 2588, National Bureau of Economic Research, Inc.
- Barro, Robert J., 1990. "Government Spending in a Simple Model of Endogeneous Growth," Scholarly Articles 3451296, Harvard University Department of Economics.
- Heng-fu Zou, 1998.
"The spirit of capitalism, social status, money, and accumulation,"
CEMA Working Papers
99, China Economics and Management Academy, Central University of Finance and Economics.
- Heng-fu Zou, 1998. "The spirit of capitalism, social status, money, and accumulation," Journal of Economics, Springer, vol. 68(3), pages 219-233, October.
- Jess Benhabib & Mark M. Spiegel, 2006.
"Moderate inflation and the deflation-depression link,"
Working Paper Series
2006-32, Federal Reserve Bank of San Francisco.
- Jess Benhabib & Mark M. Spiegel, 2009. "Moderate Inflation and the Deflation-Depression Link," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 41(4), pages 787-798, 06.
- Robert E. Lucas, Jr., 2000. "Inflation and Welfare," Econometrica, Econometric Society, vol. 68(2), pages 247-274, March.
- Wen-ya Chang, 2006. "Relative Wealth, Consumption Taxation, and Economic Growth," Journal of Economics, Springer, vol. 88(2), pages 103-129, 08.
- Sergio T. Rebelo, 1990.
"Long Run Policy Analysis and Long Run Growth,"
NBER Working Papers
3325, National Bureau of Economic Research, Inc.
- repec:ebl:ecbull:v:5:y:2008:i:13:p:1-7 is not listed on IDEAS
- Shaghil Ahmed & John H. Rogers, 1998.
"Inflation and the great ratios: long-term evidence from the U.S,"
International Finance Discussion Papers
628, Board of Governors of the Federal Reserve System (U.S.).
- Ahmed, Shaghil & Rogers, John H., 2000. "Inflation and the great ratios: Long term evidence from the U.S," Journal of Monetary Economics, Elsevier, vol. 45(1), pages 3-35, February.
- Dotsey, Michael & Sarte, Pierre Daniel, 2000. "Inflation uncertainty and growth in a cash-in-advance economy," Journal of Monetary Economics, Elsevier, vol. 45(3), pages 631-655, June.
- Chang, Wen-ya & Hsieh, Yi-ni & Lai, Ching-chong, 2000. "Social status, inflation, and endogenous growth in a cash-in-advance economy," European Journal of Political Economy, Elsevier, vol. 16(3), pages 535-545, September.
- Jang-Ting Guo & Shu-Hua Chen, 2008. "On the growth and velocity effects of money," Economics Bulletin, AccessEcon, vol. 5(13), pages 1-7.
When requesting a correction, please mention this item's handle: RePEc:kap:jeczfn:v:110:y:2013:i:3:p:257-272. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Guenther Eichhorn)or (Christopher F. Baum)
If references are entirely missing, you can add them using this form.